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Both the direct and indirect methods are used to prepare which part of the statement of cash flows, and do they yield the same result for it?
AThe entire statement; no, different amounts
BThe investing activities section; no, different amounts
CThe financing activities section; yes, the same amount
DThe operating activities section; yes, the same amount
Answer & Solution
Correct answer: D. The operating activities section; yes, the same amount
1. The choice of method pertains only to the operating activities section.
2. Investing and financing sections are always prepared by the direct approach.
3. Both methods produce the same net cash flow from operating activities (e.g. $46,000 in the worked example).
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §7.2.5 "Comparative Operating Activities Sections", p.284_
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